February 9, 1972
Our latest survey of businessmen and bankers in the Fifth District suggests a further moderate improvement in business activity in recent weeks. Survey respondents indicate continuing gains in general retail sales but no great strength in automobile demand. The manufacturing sector continues to register advances, with manufacturing respondents reporting further increases in shipments, new orders, backlogs, employment, and hours worked per week. Results of a special survey of inventory plans suggest that both manufacturers and retailers are currently in the process of making small to moderate increases in their inventory positions. Bankers, however, report no notable improvement in inventory loans or in business loan demand in general. On the other hand, consumer and real estate loans remain strong.
Compared with recent surveys, an unusually large fraction of manufacturers in our latest survey report increases in new orders and backlogs. A smaller fraction indicate increases in shipments, employment and hours worked per week. Interestingly, nearly a third of the manufacturers in our survey report less than adequate supplies of unskilled labor in local labor markets while nearly one half report less than adequate supplies of skilled labor. Of 26 manufacturing firms participating in a special survey of inventory plans, 9 indicated a change in plans in view of recent changes in sales and sales prospects. Of these, 5 reported upward adjustments in planned inventory positions and 4 reported downward adjustments. Eleven of the 26 indicated that their inventories will rise slightly to moderately in the current quarter while 6 plan inventory cutbacks in the same period.
A large majority of respondents in the trade sector report further recent gains in retail sales, although reports suggest no great bouyancy in sales of new automobiles. Employment in this sector has changed little in recent weeks, although hours worked per week are reported up. Only 6 major retailers were included in our special survey of inventory plans, but of these half indicated that planned inventory positions had been adjusted upward in light of recent changes in sales and sales prospects. Four of the 6 indicated slight to substantial increases in inventory positions in the current quarter while one indicated a slight decrease.
Responses from District bankers suggest some slight further increases in both residential and nonresidential construction during the past month. Approximately 40 percent of banking respondents reported increases in the demand for mortgage loans. Mortgage funds, however, apparently continue to be plentiful and some District banks recently announced reductions in mortgage rates, to 7 percent. Bankers report continued buoyancy in consumer loan demand, although the rate of increase in consumer outstandings appears to have tapered off somewhat in recent weeks. Many District bankers, however, appear concerned over what they consider to be unusually sluggish demand for business loans.
In our special survey of inventory plans, a sample of bankers was queried concerning current demand for inventory loans and their expectations concerning this type of loan demand during the first quarter. Current loan demand was reported as normal by 8 respondents, weaker than usual by 9 respondents, and stronger than usual by 2 respondents. Eleven bankers expect demand for business inventory loans for the first quarter of 1972 to be about as usual, 5 expect weaker than usual demand, and 3 expect stronger than usual demands.
Respondents are generally optimistic about the economic outlook. Approximately 60 percent of banking respondents believe that economic activity in their area will increase in the immediate future.